P&G signals plans to cut ad costs by shifting to digital media

Procter & Gamble is looking to lower its promotion costs by leaning more on digital media, Chairman and CEO Bob McDonald told analysts in an earnings call.

The advertising giant has historically spent 9%-11% on advertising, but with earnings softening and under fire from analysts and investors over its bloated promotion budget, the company is looking for corners to cut and finding them in social media.

“There are just so many different media available today and we're quickly moving more and more of our business into digital,” McDonald said. “And in that space, there are lots of different avenues available. In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient.”

Havas Health digital chief Larry Mickelberg hailed the Cincinnati company for its leadership in digital marketing.

“This is yet another example of the maturation of digital as the pre-eminent marketing channel,” said Mickelberg, “offering rapid and targeted reach and low or even no cost distribution for clever concepts and proving that while money doesn't necessarily have ideas, great ideas make money.”

“It's not at all surprising to hear P&G is moving to a more digital channel-centric ad environment,” said Ogilvy CommonHealth head Matt Giegerich. “The creative options are seemingly endless, the customer targeting can be laser-focused and the performance metrics are proving more and more compelling versus traditional channels. Whether or not all these potential gains can translate to the Rx consumer marketing realm remains to be seen, given the massive variations in health-related categories and audiences, the economic nuances of the influencer vs. purchaser model we've all grown accustomed to, as well as the industry's overall regulatory anxiety, which remains steeped in still-vague guidance from the FDA.”